9911796707
TMI Blog1991 (12) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... ,63,06,800, the IAC, Range-VI (Central), Calcutta initiated penal action- under section 273(2)(a) of the Act against the assessee for filing wrong estimate of advance tax under sections 212(1) and (2). In response to the show-cause notices against the levy of penalty, the assessee submitted its objections in writing on 14-3-1980 and again on 20-1-1986. The ITO, Central Circle-IV, Calcutta, who came to have jurisdiction over this case, in the meanwhile considered these objections of the appellant and held as follows to impose a penalty of Rs. 2,25,544 under section 273(2)(a) of the Act :-- " The assessee's submission in the replies have been considered. The assessee's submission that the delay in finalisation of A/c. till August 1976 was a ground for filing lower estimate is not accepted. The audit of the company is generally completed after the close of the accounting year. If the assessee's contention is accepted then no Company is required to submit an estimate of Advance Tax during the Financial Year as its account is not completed within the accounting year. Further, it is found from the 'Director's Report' for the accounting year ended on 31-3-1975 under 'Mill Operation' tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an income of Rs. 2,69,31,790 and that the estimates of advance tax, referred to above, were filed after this date wherein the income was estimated by the assessee at Rs. 1,60,00,000 and Rs. 2,25,00,000. The Commissioner noticed that in the return filed on 28-9-1976, the total income declared by the assessee was Rs. 3,45,94.013. According to him, in the estimate filed, the income estimated was even at the lower figure as compared to returned income in the preceding year and that no explanation was whatsoever offered as to how the estimate was filed showing such a low income when the production was showing an upward trend and when the assessee had already declared income at Rs. 2,70,00,000 for the preceding year. On these facts, the Commissioner, therefore, held that the assessee had filed an estimate which it knew or had reason to believe to be untrue. He, therefore, upheld the penalty levied by the ITO and dismissed the appeal. Aggrieved by this order of the Commissioner, the appellant has come up on further appeal to the Tribunal. 6. Shri M.P. Thard, the learned counsel for the appellant, filed a compilation consisting of 43 pages and reiterated the submissions that were urged b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is shown by the assessee for the two estimates of advance tax filed by it either before the departmental authorities or even before the Appellate Tribunal. He argued that the submission that these estimates were based on the income returned for the immediately preceding assessment year after taking into account the rise in production as well as the fall in the price of paper in the year of account, was being stated for the first time before the Appellate Tribunal and there was absolutely no material either to substantiate this or to prove how these estimates were arrived at. He submitted that the present explanation stated before the Tribunal was an entirely new case which was being set up for the first time before the Tribunal and that the same should not be allowed to be taken up at this late stage. He further argued that the said explanation is also vague and unsubstantiated. Shri Biswas further submitted that on the authority of the decisions of the Calcutta High Court, it must be held that the assessee had failed to substantiate the basis of the advance tax estimates filed by it for this year and in the absence of any such satisfactory explanation, the adverse inference drawn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payable under such statement or, as the case may be, such notice, whichever is less ; " It would be noticed from the above provision of law that the default put against the assessee is regarding the advance tax estimate filed by it, "which it knew or had reason to believe to be untrue". This expression has been the subject-matter of judicial Interpretation even under the old Act under which the corresponding provision was section 18A(9)(a) read with section 28(1)(c) of the Indian Income-tax Act, 1922. Thee earliest decision on the subject is that of Madras High Court in the case of P. Arunachala Mudaliar v. CIT [1963] 50 ITR 36. On pages 41 and 42 of the reports, the Madras High Court held as follows :-- " The point that arises for decision is whether the assessee furnished the estimate of the tax under section 18A(2) on 13th September, 1952, knowing or having reason to believe that it was untrue. Now, section 18A(9) is one of the punishment sections of the Act. It is a common feature of every taxing statute to impose penalty for violation of all or any of the provisions therein. Such penal provision has to be construed so as not to affect the subject, unless he or she is plai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee that he thought that his estimate represented a probable income of the year would not be sufficient to escape the liability under section 273 of the Act. He has to justify the basis of the estimate. The estimate must be an honest estimate based on the accounts which are available with the assessee on the date of estimate. The knowledge that the estimate is untrue or one which the assessee believes to be untrue must be at the point of time when he submits the estimate. The mens rea or the mental element must be adjudged with reference to the facts and circumstances appearing at the time when the estimate was submitted. The evidence, whether negative or positive, small or large, may show that an honest and fair estimate was made by the assessee and there was no conscious or deliberate furnishing of untrue estimate. In such a case, no penalty can be imposed." [Emphasis supplied] In this case Their Lordships of the Calcutta High Court have referred to all the decisions bearing on the subject including the decision of the Madras High Court in the case of Appavoo Pillai above. The other decision in Birla Cotton Spg. Wvg. Mills Ltd.'s case which is the same as in Birla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000 as its total income for the assessment year 1976-77 is not known. We have already referred to the findings of the CIT (Appeals) in this regard pointing out the total lack of basis and explanation offered by the assessee for this estimate of advance tax filed by it on 12-12-1975 in spite of repeated opportunities given by the Departmental authorities at the various stages. As rightly pointed out by the Commissioner (Appeals), the Directors' report for the year under appeal shows an increase of 12% in production as a result of putting into commission remaining equipments under the "Crash programme" which was being pursued by the appellant from the earlier accounting year. In fact, the Directors have said : " Due to increased production and improved working efficiency resulting in higher yield from raw materials, the working of the Mills has shown better results this year. Due to picking up of demand, the off-take of paper has improved resulting in reduction of stocks to normal level". If this report of the Directors regarding the Mill operation in their report is taken along with the income declared by the assessee in its return of income for the earlier assessment year 1975-76, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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